Supply Chain Strategy and Management

Supply Chain Strategy and Management

3/28/12Latest Blog Post

Excerpt from the Book review of David Simchi-Levi’s Operations Rules in Interfaces by Luk Van Wasssenhove INSEAD, Technology and Operations Management, This is an excellent book! The reader who is truly interested in operations management should consider buying it. It is insightful, deep but not technical, to the point, and illustrated with many interesting examples. I believe it […]

Contact Us

The new era in Silicon Valley centers on artificial intelligence and robots, a transformation that many believe will have a payoff on the scale of the personal computing industry or the commercial internet, two previous generations that spread computing globally. Computers have begun to speak, listen and see, as well as sprout legs, wings and wheels to move unfettered in the world. The shift was evident in a Lowe’s home improvement store here this month, when a prototype inventory checker developed by Bossa Nova Robotics silently glided through the aisles using computer vision to automatically perform a task that humans have done manually for centuries.

What is blockchain? It’s essentially a secure database, or ledger, spread across multiple computers. Everybody has the same record of all transactions, so tampering with one instance of it is pointless. Already, 1.1 million items sold or on sale at Walmart are on a blockchain—including chicken and almond milk—helping the company trace their journey from manufacturer to store shelf. Global shipping giant Maersk uses the same technology from IBM to track shipping containers, making it faster and easier to transfer them and get them through customs.

In Kellogg’s old distribution model (the DSD model), Kellogg would deliver snacks to its own warehouses, and from there distributors would deliver the snacks to retail stores. In the new warehouse model, Kellogg will deliver snacks directly to retailer warehouses, which will then deliver to stores or directly to consumers. The warehouse model allows Kellogg to more accurately gauge consumer demand and stock inventory accordingly.

Insufficient rains in India have resulted in several years of poor harvests of chickpeas, the main ingredient in hummus. The country, by far the world’s largest producer of chickpeas, mostly grows the legume for domestic consumption. But worse-than-expected harvests mean that it has had to buy more chickpeas from growers elsewhere, putting pressure on supplies worldwide and driving up prices. Those limited supplies of chickpeas have combined with rising demand for hummus in Britain to send prices higher. Average prices for the dish at supermarket are 12 percent higher than a year ago. That is significantly more than grocery price inflation of 3.6 percent, and overall inflation of 2.7 percent. It is the latest example of weather leading to poor harvests in one part of the world, and resulting in shortfalls and price rises at supermarkets far away.

Just-in-time may be losing just a bit of its luster. Recent scandals at a range of Japanese manufacturers and suppliers have left cracks in the country’s reputation for flawless manufacturing and efficiency, threatening to accelerate an erosion of Japan’s global market share for factory-made goods and undermining management principles that have guided businesses and supply chains world-wide.

Wal-Mart’s large suppliers will now need to deliver full orders within a specified one- or two-day window 85% of the time or face a fine of 3% of the cost of delayed goods. Previously, suppliers had to hit a 75% threshold to avoid fines. For smaller suppliers the on-time threshold will move to 50%, up from 33%. The change will take effect in April.

Of the three major new products since Mr. Cook became chief executive in 2011, both AirPods earbuds in 2016 and last year’s HomePod speaker missed Apple’s publicly projected shipping dates. The Apple Watch, promised for early 2015, arrived late that April with lengthy wait times for delivery. Apple also was delayed in supplying the Apple Pencil and Smart Keyboard, two critical accessories for its iPad Pro. The delays have contributed to much longer waits between Apple announcing a product and shipping it: an average of 23 days for new and updated products over the past six years, compared with the 11-day average over the six years prior.

Longer lead times between announcement and product release have the potential to hurt Apple on multiple fronts. Delays give rivals time to react, something the company tried to prevent in the past by keeping lead times short. They can stoke customer disappointment and have cost Apple sales.

Whole Foods is facing a crush of food shortages in stores that’s leading to empty shelves, furious customers, and frustrated employees. Whole Foods employees blame the shortages on a buying system called order-to-shelf that Whole Foods implemented across its stores early last year.

In the past, Nike would start manufacturing when it got a futures order, meaning an order it had to deliver in the next six months. Now it’s moving toward manufacturing quickly in response to what consumers are actually buying. Nike has just moved into a near-shore, purpose-built footwear factory that will deliver over 3 million pairs to North America in fiscal year ’18 alone. By 2023 it plans to produce tens of millions of pairs near shore. More than 25% of those shoes will be made on a “responsive model” with short lead times.

Pointy combines hardware and a software platform to help local retailers easily establish a presence online in order to drive more people to their store. Specifically, the ​”Pointy​ ​box”​ hardware ​gadget connects to a store’s barcode scanner and automatically puts scanned items on a Pointy-powered website for the store.

With Harvey’s floods shutting down almost all the state’s plants, 61 percent of U.S. ethylene capacity has been closed, according to PetroChemWire. Production may not return to pre-storm levels until November, according to Jefferies.

In a dynamic pricing problem where the demand function is not known a priori, price experimentation can be used as a demand learning tool. This paper demonstrates a pricing policy under these constraints and describes an implementation of this pricing policy at Groupon. The field study shows significant impact on revenue and bookings.

The North American recession of 2007–09 was hard on surface-transport companies, but today volumes are back, and resilient carriers have become more efficient. Over the past several years, Canada and Mexico have rapidly built supply-chain capabilities for more efficient transport, both domestically and abroad. By embracing e-commerce, US consumers have fundamentally changed the supply chain, pushing inventories further downstream. Other changes are also gathering force, including emerging technologies such as autonomous vehicles, connected devices, alternative fuels, and blockchain, to name a few. As a result of all these changes, transport markets are less predictable than ever, and require more vigilance from executives.